September 28, 1964 was paid through the seventh, eighth, ninth, tenth, eleventh, and twelfth years. On August 25, 1961, the Santa Fe land office received a letter from the Dallas office of the General Accounting Office dated August 23, 1961, recommending that the land office collect $6,579.42, an amount sufficient to cause the payments made under the lease to equal minimum royalties due for the lease years commencing August 1, 1953, and ending June 30, 1961. The letter stated that the Geological Survey records disclosed that under former departmental regulation 43 CFR 192.81, now 43 CFR, 1964 Supp., 3125.2, the minimum royalty obligation of the lease became effective for the lease year beginning August 1, 1952, and added: * It is our understanding that once the minimum royalty provision attaches it continues in effect for the life of the lease. We noted that the Director of Geological Survey in his memorandum of June 15, 1954, determined that the lands in the lease were not within a known geological structure. We found no evidence which shows that this determination disturbs or could disturb the minimum royalty status of the lease. We recommend that your office take action to collect amounts from the lessees which will bring their payments to equal minimum royalties due for the lease years ended July 31, 1954, 1955, 1956, 1957, 1958, 1959, 1960 and June 30, 1961 (or $6,579.42). * The land office thereupon demanded that sum of the lessee and, upon appeal, the Division of Appeals affirmed its action. Upon Elliott, Inc.'s further appeal, the Secretary requested the opinion of the Comptroller General of the United States as to the correctness of the demand made upon the appellant. In a letter dated August 31, 1964, numbered B-154709, the Acting Comptroller General first stated, that a lease which goes on a minimum royalty basis after production in paying quantities is obtained remains on a minimum royalty basis so long as the lease subsists, regardless of whether it is thereafter possible to continue production. He then held: it is our opinion that a reclassification of the leased lands in this case to exclude them from "a known geologic structure" would have been necessary to permit an extension of the lease for an additional period of five years, and that such reclassification would be controlling on the question as to whether royalties instead of minimum rentals were to be paid during the entire extended term of the lease if no discovery of oil or gas in paying quantities was made after the primary term of the lease. The reclassification of June 15, 1954, appears to have been based upon a reasonable determination that the discovery made by the lessee was of such minor significance as to require the conclusion that the Department was not required to continue in effect the original determination that the lands covered by the lease were within the known geologic structure of a producing oil or gas field when the original term of the lease had expired. Otherwise, and depending upon whether the lease could qualify for an indefinite extension of the lease period upon a showing that drilling operations were being diligently prosecuted on the expiration date of the primary lease period, any further leasing of the lands could not have been made except on a competitive bidding basis as required under the first paragraph of the amended section 17 of the Mineral Leasing Act of 1920. We doubt that it would have been possible to obtain reasonable offers if the bidders in that event were fully informed of the results of drilling operations made by the previous noncompetitive lessee, or that the Congress ever intended to restrict your Department in the matter of making reasonable classifications or reclassifications of lands available for oil and gas exploration purposes. Ordinarily, where a lessee exercises a right to obtain an extension of his lease, it is to be presumed that rental or other consideration payable under the primary term of the lease would continue in effect during the extended period. Thus, it might be argued that the noncompetitive leasing statute here involved contemplated the continuance of minimum royalty payments regardless of any change made in the classification of the leased lands before the end of the initial five-year period of the lease. However, in our opinion, such construction of the statute would accomplish in this case an unreasonable and improbable result such as may not properly be assumed to have been the intention of the Congress. Accordingly, we do not consider the extensions of the lease granted in this case to have been invalid in any respect, although made with the apparent understanding that minimum royalties would not be charged unless and until a new discovery of oil or gas in paying quantities was made. It appears that the lessee is indebted to the United States only for the minimum royalty payment due for the fifth lease year. Therefore, pursuant to the authority delegated to the Solicitor by the Secretary of the Interior (210 DM 2.2A (4) (a); 24 F.R. 1348), Departmental Manual; in accordance with the Comptroller General's opinion, the decision of the Division of Appeals is affirmed insofar as it demands payment of $1,459 as minimum royalty for the fifth lease year and is reversed insofar as it required the payment of any sums for the extended years of the lease, and the case is remanded for further proceedings consistent herewith. ERNEST F. HOм, 1 See: Murphy Corporation, 71 I.D. 233 (1964), for a discussion of other situations in which a lease may revert to a rental status after having been subject to minimum royalty. US GOVERNMENT PRINTING OFFICE 1964 A. S. SCHULMAN ELEC. CO. APPEALS OF COMMONWEALTH ELECTRIC COMPANY AND IBCA-410 IBCA-417 Contracts: Appeals Decided October 12, 1964 An appeal from findings of a contracting officer granting an extension of time which is taken solely on the ground that the findings state an erroneous reason for granting the extension will be dismissed where it appears that the challenged statement will have no relevancy or effect in the adjudication of any ungranted claim of the appellant. BOARD OF CONTRACT APPEALS These appeals relate to extensions of time under a contract of the Bureau of Reclamation for the construction of transmission lines forming part of the Trinity River Division of the Central Valley Project in California. The contract, which was dated January 16, 1962, was on Standard Form 23 (January 1961 edition) and incorporated the General Provisions of Standard Form 23A (April 1961 edition) for construction contracts. The work to be done was divided into two schedules. The completion date for Schedule No. 1 was October 4, 1963, but the work was not accepted as substantially complete until December 31, 1963, a delay of 88 days. The completion date for Schedule No. 2 was July 6, 1963, but the work was not accepted as substantially complete until October 9, 1963, a delay of 95 days. The contract provided for the imposition of liquidated damages on account of inexcusable delays at the rate of $1,000 per day for Schedule No. 1 and $500 per day for Schedule No. 2. The contracting officer in findings of fact dated October 17, 1963, found that excusable delays aggregating 100 days had occurred with respect to each schedule. He particularized the loss of time as consisting of 71 days caused by a strike and 29 days caused by unusually severe weather. The contractor timely appealed from this decision, the appeal being docketed as IBCA-410. Subsequent to the taking of the appeal, the contracting officer rescinded his findings of fact and issued new ones, dated November 26, 1963. The new findings were the same as the original ones except for the addition of statements to the effect that the 100 days of delay had projected the work under Schedule No. 1 into the rainy season, and that the extent to which such projection might call for an extension of time beyond 100 days would be determined later. The contractor 71 I.D. No. 10 749-564-64 timely appealed from this decision, the appeal being docketed as IBCA-417. The Government has filed a motion to dismiss which is predicated on the view that the appeals are moot since both schedules were actually completed in a lesser time (88 days for Schedule No. 1; 95 days for Schedule No. 2) than the 100 days allowed by the extensions granted by the contracting officer (without taking into account his concession that an additional extension might be granted later for Schedule No. 1). Appellant contends, however, that the appeals are not moot. In support of this contention appellant points out that its requests for time extensions were based upon a study made for it by a firm of consulting engineers. The study concluded that the work on Schedule No. 1 had been delayed for 30 days by the strike, 30 days by the weather, 2 days by changes in the plans, and 118 days by delays of the Government in furnishing right-of-way for the transmission lines; and that the work on Schedule No. 2 had been delayed for 30 days by the strike, 15 days by the weather, and 49 days by delays of the Government in furnishing right-of-way for the transmission lines. The contracting officer, on the other hand, evaluated only the strike and the weather in his findings, and did not mention the alleged changes in the plans or the alleged delays in furnishing right-of-way. Appellant asserts that the contracting officer erred in allowing more time for the strike and the weather than had been requested, and, conversely, in allowing no time at all for the alleged delays in furnishing rightof-way. It says that these errors might effect its "claim for an equitable adjustment because of acceleration of the work" or its "claim for the Government's delay in furnishing right-of-way." Neither of the claims just mentioned are the subject of any appeal now pending before this Board, but appellant evidently fears that were they to be brought before the Board or to be sued upon in the courts, the findings that form the subject of the present appeals might be accorded binding effect if left unchallenged. The problem thus presented is essentially the same as one which the Board had occasion to consider in Utah Construction Company. The pertinent portions of that decision read as follows: The statements of appellant's counsel make it apparent that this appeal [IBCA-140] was taken solely because of appellant's fear that its claim for additional compensation might be prejudiced unless it challenged the contracting officer's findings that the delay in the completion of the job was caused by a flood. This fear is not well grounded. The findings in question have to do solely with the question of whether the delay in completion was excusable under 1 IBCA-133 and IBCA-140 (June 10, 1960), 67 I.D. 248, 60-1 BCA par. 2649. 2 Gov. Contr. 397. A. S. SCHULMAN ELEC. CO. Clause 5, "Termination for Default--Damages for Delay-Time Extensions," of the General Provisions of the contract. They have nothing to do with the question of whether the delay was one for which additional compensation would be allowable. Prior to the making of such findings, the contracting officer, in his latter decision of August 30, 1957, had disclaimed any jurisdiction to consider appellant's claim for additional compensation. Hence, it is obvious that he could not have intended that the findings with respect to the cause of the delay in completion should apply to the latter claim. In view of the foregoing the Board holds that the findings challenged in IBCA-140 will have no relevancy and no effect in such further proceedings as may be had before the contracting officer or the Board for the adjudication of those additional compensation items that are subject to administrative determination, as provided for in the portion of this opinion dealing with IBCA-133. With respect to those additional compensation items that are not subject to administrative determination, the following statement of the Court of Claims would seem to be pertinent : 2 On the question of the assessment of liquidated damages the findings of the contracting officer as to the facts and the extent of the delay were made final and conclusive, subject to appeal to the head of the department; but on the question of whether or not the defendant had caused a delay for which it should be mulcted in damages, they have not agreed that his findings of fact should be final and conclusive.3 It must be concluded that the appeal in IBCA-140 presents no justifiable issue of law or fact. The only relief asked for by appellant is a declaration that the contracting officer should have granted the 365-day extension of time for a reason other than the one he assigned for granting such extension. As appellant does not want us to shorten, lengthen, or otherwise alter the extension of time, it is evident that the asking of the requested declaration would involve the determination of a purely hypothetical question insofar as the extension itself is concerned. Furthermore, since the various parts of appellant's claim for additional compensation must be adjudicated on the basis of their own merits, and not on the basis of the reason assigned by the contracting officer for granting the time extension, the requested declaration would also involve the determination of a purely hypothetical question insofar as the matters that form the subject of the appeal in IBCA-133 are concerned. Accordingly, IBCA-140 is dismissed. It is true that in suits by contractors for damages on account of alleged Government delays, findings by contracting officers that the delays alleged had in fact been caused by the Government have sometimes been accorded evidentiary weight, as being in the nature of 2 Accord: Electrical Builders, Inc., IBCA-406 (August 12, 1964), 1964 BCA par. 4377. * Quoted from Langevin v. United States, 100 Ct. Cl. 15, 30 (1943). Accord: Continental Illinois Nat. Bank & Trust Co. v. United States, 126 Ct. Cl. 631, 640-41 (1953); Anthony P. Miller, Inc. v. United States, 111 St. Cl. 252, 330 (1948); Schmoll v. United States, 105 Ct. Cl. 415, 458 (1946); Silberblatt & Lasker, Inc. v. United States, 101 Ct. Cl. 54, 80-81 (1944). |